In May 2024, the Canadian real estate market continued to show signs of deceleration, with the national benchmark home price declining to $714,300, representing a 0.2% decrease from April and a 2.4% drop year over year. Despite the slowdown, the Canadian Real Estate Association (CREA) remains hopeful that the recent interest rate cut by the Bank of Canada will revitalize the market.
Shaun Cathcart, CREA’s senior economist, suggested that the central bank’s decision to reduce the rate to 4.75% on June 5 could have a positive psychological impact on potential buyers. “May was another sleepy month for housing activity in Canada, although it may prove to be the last of those now that interest rates have moved lower,” Cathcart remarked. He also noted that the focus is now on the possibility of further rate cuts.
Home sales across Canadian Multiple Listing Service (MLS) systems fell by 0.6% month over month in May, continuing to hover just below the ten-year average. Although new listings increased by 0.5%, the market remained largely stagnant. Year over year, home sales dropped by 5.9% nationally, with significant declines in Greater Vancouver (19.8%) and Greater Toronto (22.2%). Of the 26 regions tracked by CREA, 18 reported lower sales compared to the previous year.
BMO Senior Economist Robert Kavcic observed that the rate cut led to more listings rather than sales, noting a 28.4% surge in the number of properties for sale compared to the previous year. Active residential listings in Ontario rose sharply, up 63.9% from May 2023, marking the highest level of active listings for May in over five years.
The increase in inventory is seen as beneficial for buyers, as the sales-to-new listings ratio eased to 52.8% in May from 53.3% in April. Kavcic emphasized that this slight weakening in the ratio is contributing to continued modest downward pressure on prices.
Meanwhile, the Canada Mortgage and Housing Corporation (CMHC) reported a surge in housing starts, reaching 264,500 annualized units in May, the highest level since September. This growth was primarily driven by a 13% rise in multi-unit starts, particularly condominiums, while single-unit starts saw a modest 2% increase.
Kavcic pointed out that the current rate of construction is unlikely to sustain further increases, noting that the ongoing stream of completions, particularly in the condo market, could temper resale market prices and slow rent growth.
